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AP Microeconomics

Subjects : economics, ap
Instructions:
  • Answer 50 questions in 15 minutes.
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  • Match each statement with the correct term.
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This is a study tool. The 3 wrong answers for each question are randomly chosen from answers to other questions. So, you might find at times the answers obvious, but you will see it re-enforces your understanding as you take the test each time.
1. The upward part of the LRAC curve where LRAC rises as plant size increases. This is usually the result of the increased difficulty of managing larger firms - which results in lost efficiency and rising per unit costs.






2. Exists when the production of a good creates utility for third parties not directly involved in the consumption of production of the good






3. The difference between total revenue and total explicit costs






4. Two goods are consumer substitutes if they provide essentially the same utility to consumers






5. A firm that has market power in the factor market (a wage-setter)






6. The more of a good that is produced - the greater the opportunity cost of producing the next unit of that good






7. A per unit tax on production results in a vertical shift in the supply curve by the amount of the tax






8. When firms focus their resources on production of goods for which they have comparative advantage






9. Entry (or exit) of firms does not shift the cost curves of firms in the industry






10. The change in quantity demanded that results from a change in the consumer's purchasing power (or real income)






11. The imbalance between limited productive resources and unlimited human wants






12. Exists if a producer can produce more of a good than all other producers






13. The most desirable alternative given up as the result of a decision






14. The price of a good measured in units of currency






15. The difference between the price received and the marginal cost of producing the good. It is the area above the supply curve and under the price






16. MUx / Px = MUy/Py or MUx/MUy = Px/Py






17. The change in total product resulting from a change in the labor input. MPL = dTPL/dL - or the slope of total product






18. Ed = 8 - infinite change in demand to price change






19. A group of firms that agree not to compete with each other on the basis of price - production - or other competitive dimensions. Cartel members operate as a monopolist to maximize their joint profits






20. Holding all else equal - when the price of a good rises - suppliers increase their quantity supplied for that good






21. Direct - purchased - out-of-pocket costs paid to resource suppliers provided by the entrepreneur






22. The total quantity - or total output of a good produced at each quantity of labor employed






23. The proportion of the tax paid by the consumers in the form of a higher price for the taxed good is greater if demand for the good is inelastic and supply is elastic






24. Ed = 1






25. For one good - constrained by prices and income - a consumer stops consuming a good when the price paid for the next unit is equal to the marginal benefit received






26. A legal minimum price below which the product cannot be sold. If a floor is installed at some level above the equilibrium price - it creates a permanent surplus






27. TR = P * Qd






28. Ei > 1






29. Indirect - non-purchased - or opportunity costs of resources provided by the entrepreneur






30. Total product divided by labor employed. APL = TPL/L






31. The additional benefit received from the consumption of the next unit of a good or service






32. Occurs when an economy's production possibilities increase. This can be a result of more resources - better resources - or improvements in technology.






33. Measures the cost the firm incurs from using an additional unit of input. In a perfectly competitive labor market - MRC = Wage. In a monopsony labor market - the MRC > Wage






34. The study of how people - firms - and societies use their scarce productive resources to best satisfy their unlimited material wants.






35. Exists if a producer can produce a good at lower opportunity cost than all other producers






36. A very diverse market structure characterized by a small number of interdependent large firms - producing a standardized or differentiated product in a market with a barrier to entry






37. Another way of saying that firms are earning zero economic profits or a fair rate of return on invested resources






38. AFC = TFC/Q






39. Total revenue rises with a price increase if demand is price inelastic and falls with a price increase if demand is price elastic






40. Models where firms are competitive rivals seeking to gain at the expense of their rivals






41. The downward part of the LRAC curve where LRAC falls as plan size increases. This is the result of specialization - lower cost of inputs - or other efficiencies of larger scale.






42. Exists when the production of a good imposes disutility upon third parties not directly involved in the consumption or production of the good






43. In the case of a public good - some members of the community know that they can consume the public good while others provide for it. This results in a lack of private funding and forces the government to provide it






44. All firms maximize profit by producing where MR = MC






45. The number of units of any other good Y that must be sacrificed to acquire good X. Only relative prices matter






46. Costs of inputs - technology and productivity - taxes/subsidies - producer speculation - price of other goods that could be produced - and number of sellers all influence supply






47. Additional benefits to society not captured by the market demand curve from the production of a good - result in a price that is too high and a market quantity that is too low. Resources are underallocated to the production of this good






48. Goods that are both nonrival and nonexcludable. One person's consumption does not prevent another from also consuming that good and if it is provided to some - it is necessarily provided to all - even if they do not pay for that good






49. Excess demand; a shortage exists at a market price when the quantity demanded exceeds the quantity supplied






50. Occurs when there is no more incentive for firms to enter or exit. P=MR=MC=ATC and profit = 0







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